The base metals are under pressure today as escalating geopolitical tensions between the USA and North Korea continue to increase risk aversion, triggering profit-taking after bullish sentiment pushed many of the metals to fresh multi-month highs this week.

The base metals trading on the London Metal Exchange have been
led lower by a sharp profit-taking dip in nickel, which stands
down over 2% at the time of writing. The rest are off by an
average of 0.7%, with lead prices off 1% and copper prices off
0.4% at $6,348 per tonne. Volume has been high with 12,270 lots
traded as of 06:45 BST.

By contrast the precious metals remain firm, with gold and
silver holding near multi-week highs at $1,285 and $17.05 per
oz, respectively, supported by flight-to-safety demand.

On the Shanghai Futures Exchange (SHFE) this morning, copper
prices are down by 1%, zinc is down by 1.4% and lead by a
deeper 2.1% at the time of writing.

In other metals in China, September iron ore prices on the
Dalian Commodity Exchange have given back some recent gains,
prices are off 4.5% at 570 yuan per tonne. On the SHFE, steel
rebar prices are down 3.2%.

Equities remain under pressure this morning, adding to
continued sell-off in the US market, which triggered a 44% jump
in the VIX volatility index. The CSI 300 and Hang Seng were
down 1.3% and 1.6%, respectively, at the time of writing.
Japanese markets are closed for a national holiday.

In other markets oil prices have slipped lower with Nymex crude
down 0.7%. The dollar index currently stands at 93.42, although
still above its recent low of 92.84 on August 3.

The macroeconomic agenda is busy today and includes French and
German CPI inflation figures for July. Inflation data is also
expected from the USA and could prove pivotal to market
direction as an absence of inflation has led investors to dial
back their expectations for monetary tightening by the US
Federal Reserve (Fed). Market expectation for the Fed to raise
interest rates at the December Federal Open Market Committee
(FOMC) meeting stands at 41%, according to the CME Fedwatch.
FOMC members Robert Kaplan (Dallas) and Neel Kashkari
(Minnesota) are also scheduled to speak today.

For the base metals recent fundamental developments should help
to provide underlying support, but considering the scale of
recent gains some profit taking/consolidation is likely. For
the moment we expect corrections to prove short-lived, but with
equity market near lifetime highs there is the risk a much
deeper correction could be in the making, which would likely
drag the base metals lower.